Color of Money Live (October 17)

Oct 17, 2019

Welcome to a weekly discussion about your money hosted by Michelle Singletary, nationally syndicated personal finance columnist for The Washington Post.

Read Michelle's latest columns:
- Be careful. That multilevel marketing side hustle could be an illegal pyramid scheme.
- Even with the best advice, people can still mess up

Did you know: "Knowledge isn't power. The right knowledge is power." So, stay informed.

Read & share Michelle Singletary’s Color of Money Column on Wednesdays and Sundays.

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So glad you could join me today. Lots of questions so let's get started. 

How do MLMs still get away with claiming that you can make $18/hr or similar on their recruitment ads? After I graduated high school, I got a letter in the mail from Vector (really Cutco) trying to entice me to apply for a "secretarial" job. My parents knew right away what the scheme was but still encouraged me to go check it out for myself. I wasted an entire day "interviewing" for the job with a group of 20 other people- after I bailed, they still kept contacting me weeks afterwards. How do these companies skirt regulations/laws on misrepresentation?

Often the companies skirt the law because they classify the team as independent contractors. But there have been class action lawsuits against Vector. 

Generally, my advice. Stay away. And don't invite me to a party that turns out to be a marketing pitch!

Read: Be careful. That multilevel marketing side hustle could be an illegal pyramid scheme.


 

I got a question from last week and have some questions. Thought it might make a good column too. 

If you sent the question below can you answer my questions that follow. 

"So, the Dept of Ed denied my PSLF application, despite 10+ years of on time payments and working for the federal govt bc it was the wrong consolidation type. Argh. I'm considering refinancing my mortgage to get a lower rate, and I could reduce it by 0.35 percent APR, no points, and take cash out to pay off the loans. But it would extend the mortgage back to a 30 year. My monthly mortgage payment would increase by $150, but I would have the $800 loan payments off my back. Thoughts on why this might be a good / bad idea?"

My questions

1. Why type of loan do you have? What payment plan?

2. How much do you owe?

3. Have you applied to have Dept. of Ed review your denial?

4. How much do you owe on your mortgage?

5. How far along are you in your current home loan?

 

 

(1) The roof of our dormer was leaking. Repair estimates ranged from $1200 to $12,000 (full-roof redo). A neighbor gave us his leftover roofing tar and my 17yo son went up and spread it all around. Total cost: under $20 for tools & cleanup supplies. Roof did not leak in yesterday's storm. (2) DIshwasher wasn't draining, even though the pump was working. Internet research said there was probably a blockage in the drain hose. I pulled the drain hose, cleaned it out (gross!), and reattached it. Done! Total cost $0, a couple of hours on the floor with towels and pliers. Power comes not just from the right knowledge, but also from the right attitude--that you can get the knowledge you need and put it to use.

What a testimony! Love it.

I've done similar fixes. Phone line was not working. Went on YouTube and figured out the problem. 

 

I don't order a lot of delivery food, but the few times lately have presented a hurdle to me; once the delivery firm receives your order, they show the final price (including tax.) As you must pay with a credit card, the form REQUIRES that you leave a tip. You cannot enter "zero" or no tip, or the order will not be processed. But I don't know yet how much I will tip. If the order comes on time and is hot, I tip well (typically 20% or more). Yet if the delivery is late or cold (or other shortcomings) I reduce my tip. My tech solution is to enter $1 as the tip; I provide the rest of the tip upon delivery to my apartment building. I've had a couple of delivery staff admonish me that they only work on tips, at which time I gave him $15 and he shut up. How can delivery service DEMAND a tip?? If service is poor, I give a smaller (sometimes much smaller) tip. Yes, I know this hurts the deliverer, but it was they who selected for whom to work. With enough small tips, the delivery person may get the idea that this is not a good place to work if you rely upon tips. This encourages the DP to seek employment at a better place, one that supports better food and service, and ultimately better tips. But I don't know any of this at the time I place the order. It's like tipping blindly. Comments? Thank you.

I'm afraid my answer will just provoke more nasty comments. But here goes. I've just come to tip what I would otherwise -- bad or good service. I look at the dollar difference and conclude that whomever is delivering my food is trying to work and live, that the few bucks I would give won't make me broke. And stuff happens. If my order is wrong or cold or whatever, I ask they correct it but I don't ding the person bringing me my food. 

Read: Tipping fatigue is real, especially for travelers

I'm a single women in my late 50s. I live a mile from my brother and niece, who I see often, and a half mile from my BFF and her husband. I'm a simple 15-minute traffic-free drive from my office. But I rent. And there's constantly this voice in my head that says I shouldn't be throwing away money on rent, I should be building equity in a place of my own. However, the condos I can afford and would want to live in are miles farther away from both my work and the people I'm closest to. Should I listen to the voice of financial sense and buy a place or ignore it and stay in my cozy rented nest near my support system?

Don't listen to those voices or anyone else who tries to tell you that you're someone not financially astute if you aren't a homeowner. 

Can I get a show of hands for homeowners who know that a home can be a money pit?

I tell people all the time, you are not a financial failure if you are renting. You may very well be exercising common sense by renting for all the reasons you state. 

There are so many costs in homeownership that is not captured when people say nonsense like, "you are throwing your money away when you rent." 

You are not!

You are getting a roof over your head.

Besides I know a lot of homeowners -- A LOT -- who are a hot mess mostly because they can't afford to own. Or their property is a hot mess because they can't afford to keep it up. 

Renting also makes it easier to move should you have to for a job or other reasons. If your roof leaks you call the landlord. 

Sure, owning a home builds equity. But to tap that money you have to sell or get a loan. You can build equity by investing or saving.

There may come a time when you want to stabilize your monthly housing cost with owning a home but weight that against ALL the cost of buying a property.

Based on what you've told me you have a great situation. And, yes sometimes home ownership is not what it's cracked up to be.

Read: Being a renter doesn’t make you a financial failure

Around 30 years ago when I in a frustrating job search for my first post-college job, I got invited to one of these types of seminars. There were about 20 of us in the room. The position was a type of commission only finance sales job, and when I asked questions, they said it "wasn't for me." What I really remember is one of the recruiters said, You can make more than $50,000 a year, and one of the women asked him, "do you make more than $50,000?" He said yes, and she said, are you single? Don't remember much after that.

I've been to a number of such presentations, sometimes on purpose more often by a ruse.

When I start to ask questions they give me the stinky eye and try to shut me down. That's the first red flag it's a sham. 

I understand the posters sentiment --- but this thought below comes with A LOT of privilege. It's not always easy to get a new job. "With enough small tips, the delivery person may get the idea that this is not a good place to work if you rely upon tips. This encourages the DP to seek employment at a better place, one that supports better food and service, and ultimately better tips."

I received a lot of comments from people arguing that wait staff or food delivery folks or hotel housekeepers just need to get a better job. 

For many that is the best job they can get for any number of reasons. 

Yes, in a fair world people would be paid a living wage. But those of us who can afford to eat out or travel and have the money to spare can and I think should be generous. 

I am a tip hater. Hate the practice.

But it is a practice that ultimately helps people financially. And I'm square in the camp of to whom much is given, much is required. Because I'm grateful someone gave me a hand up and sometimes when I may not have "deserved" it.

Why are you so sure the fault is the deliverers', not the restaurants'? Especially for the lateness issue; I've seen many a Grubhub (or whatever) driver hanging around a restaurant foyer for a long time, waiting for their order.

Or there's traffic. Or, the person couldn't find the house/apartment. 

Going back to the chatter who fixed her own roof and dishwasher...big perk for me in renting is that I don't have to spend time on youtube trying to figure out what gross thing is wrong with my dishwasher. I shrug and call the landlord, and they have to fix it/pay for it. (Major props to the DIY poster though...definitely don't mean this is a dig! It's just not something I always want to do, so renting is really nice for me now)

Exactly. I get your point. And it's a good one.

Michelle, I looked but couldn't find anything in your archives on this. I was wondering what you think about long term care insurance, vs self insuring for long term care through investments. My husband and I are in our mid 40's in decent health and we are privileged to have a very solid income. We are working to pay off our mortgage before retirement, have maxed out our 401Ks and have life happens savings plus other investments. By any calculation we are financially comfortable. However, when my husband's father become terminally ill we became aware of the exorbitant cost of residential care in a nursing home. As a result we have been looking at purchasing long term care insurance for our own old age. We do not have children and we are aware that we need to plan to look after ourselves, and so that that an extended illness/geriatric decline for one of us does not put the other into adverse financial straits. What I am wondering is whether long term care insurance is really a good way to do that? The plans we have been looking at are expensive, especially if you are paying for more than one person and could easily become more so over time, and they have limits on how much they will pay and how long they will pay out for. I am a long way from being a math whiz but it's not clear to me that you would get value for the money you put in even if you needed to use the entire value of the insurance payout. I am wondering whether we would be better just to create a separate investment account and self insure? We'd be very interested in your thoughts on the matter, and any experience you or other readers have had with these types of plans, and how reliable/useful they have been.

Thanks for your questions. I've written about long term care insurance most recently in the context of the federal long term care insurance premium increases. I've listed the columns below, which include some useful information especially as it relates the possibility of premium increases.

But your question made me realize I need to revisit the issue so I'll do that soon. It's going to take a column to address all your questions. So for now, I would say definitely keep researching and pricing out policies. I do have some questions for you:

1. How much are you projected to have saved in your retirement accounts by the time you both retire? (The combined amount)

2. Do you expect to age in place or move? If you plan to stay where you are could you live there should you need long-term care? For example, are there a lot of stairs the might care harder?

3. What are you willing to spend every  month/year for a policy?  

Here are the columns:

Your strategy to contain the costs of long-term care

Tough questions about long-term care insurance

Long-term care insurance facing major pricing shift

"This encourages the DP to seek employment at a better place, one that supports better food and service, and ultimately better tips. " Seriously? This smacks of ignorance and entitlement. You have no idea why a person is working a specific job. They may well have no other options, or it may be a second or third job, or they may desperately be trying to get someone to grant them an interview. Punishing someone because you don't approve of their job is disgusting. Go pick up your own takeout if that's how you feel.

Wow. A lot of indignation about the tipping question/comment.

But let's be nice because it has led to a great discussion about putting ourselves in the shoes of others. 

There is a national real estate company is set up by what appears to be a MLS company. As a potential independent contractor for that company, should I be concerned about going to work for this type of company?

I think you should always be VERY careful of working an MLM system. As the FTC has pointed our repeatedly when it slams such schemes most people do not make money. The MLM business makes money off the recruits who think they will be making boat loads of money. 

Makes me SO MAD! Couldn't any of us make more money at some different job? I do OK but I'm not a lawyer in a fancy firm or a neurosurgeon. Tipping is part of the way things are - if you can't afford the extra $3-5 you shouldn't be ordering the pizza in the first place.

See, this is why I hesitated to rekindle the conversation about tipping. 

It's CRAZY how this pushes so many buttons. And how it does reveal the contempt many people have for folks in low-paying jobs. My goodness folks, why are we punishing people over whatever when it amounts to just a few dollars in many cases. Or maybe it is a sizable tip on an expensive bottom of wine or dinner, etc. My heart has taught me that erring on the side of generosity is priceless. 

Michelle, I think we have reached the point on our home loan when we can ask to have PMI removed. But I am unemployed. (Naturally, we have been living off our six-months-emergency fund.) My spouse is concerned that if we ask for the removal of PMI, we will have to have a reappraisal and essentially reapply for the loan, and we won't get it because I am unemployed. Is she right?

You will not have to reapply for the loan. The lender will however require the home to get officially appraised, which you typically have to pay for. Given your employment situation it's well worth seeing if you can lower your housing cost if you can remove the private mortgage insurance. 

If you have the skill, DIY can be much cheaper. Sometimes you could screw up the material you are using a couple of times while learning and still come out ahead. However, for the previous poster, it is likely that the roofing tar fix will fail in cold weather as the roofing materials contract and pull away from each other. It is likely that the valleys along the dormer have failed in the underlying flashings.

Yes, a good warning to be sure you don't make matters worse. 

fantastic doing your own repairs, but please make sure that the parts that were in the way of the leaking are drying out properly. You don't want to play with mold being in the under layers of the roof or any of the wall. I don't know how you figure that out, but you seem pretty handy, so you might want to check.

Thanks for the tip. 

Yeah, taking care of stuff yourself is great, if you can. But putting your teenager on the roof with hot tar might not be the best choice. And if the shingles or sheathing are damaged, that repair won't last long.

Lots of roofing cautions. Appreciate the warnings. Good points. 

I get that homeowning is not all that is it cracked up to be, with major expenses and riding out recessions in the housing market. That said, Renters seriously need to put aside a lot of savings that many folks have in the equivalent of equity in a home. I have a friend who parents never bought but could have. Dad has died and Mom is in a home. Mom's fees as so astronomical that my friend is depleting her savings to pay for Mom's upkeep. Mom and Dad never saved enough nor acquired equity. The key is to buy when you will stay in a place 10 years or more, and most importantly, buy only as much as you need, not the McMansion that you want with the granite and stainless steel. That way, you will have more disposable income to save for the Life Happens accounts (aka appliances die, roofs leak, etc.) and you can ride out the market more comfortably if you are not overextended in Housing Debt. My point is that you can purchase a home (condo, TH or SFM) smartly. If you don't, that's fine, but you'd better save like the dickens in addition to paying your rent because it is very likely at some point you will need extremely expensive, uninsured living assistance and care - care that can run nearly $10,000 a month.

You are right and wrong. I get that you want to provide more context to my answer but here's where I'm still right overall.

Owning a home does not put you that much ahead of renting financially. Sure, once you pay off your home you don't have a mortgage. But you still have taxes and insurance and in some areas that can be as much as a rent payment. You still have the cost of upkeep.

Further, many, many, many people just don't pay off their mortgage before they retire. So they, like renters, still have a huge housing cost. 

Therefore, renters and homeowners need to save and substantially. 

Here's why I wanted to post your comment. I need to correct this myth that someone renting is making a bad move in the long term. That's where you are wrong.  

Having a home doesn't save you from the cost of long-term care. In fact, it often makes the situation worse because people don't want to move to an adult child's home or assisted living facility. And what if they don't have equity in the home to pull from to pay for long-term care? 

I own a home and  have since my early 20s. But again, renting is a viable and long-term option for a lot of people. 

 

40/F/DMV Michelle--did you see this article? It seems that this management company is looking for a reason to evict this elderly woman to profit from a higher rent from a new tenant. It's awful.

I did see it. On the surface seems totally outrageous especially when I've been known to take extra cookies - when there are extras of course.  

"I received a lot of comments from people arguing that wait staff or food delivery folks or hotel housekeepers just need to get a better job. " But *somebody* has to do these jobs. For those of us who can afford to eat out, have food delivered, or stay in hotels, we have to pay fairly the people who are doing these difficult jobs. Let's face it, most of us wouldn't want these jobs at all.

Agreed. But to be fair to those who hate tipping, they argue that it's the business owners who are responsible to provide a fair wage and then reflect that in the cost charges to customers. But -- since they don't let's be financially kind to people who do jobs many of us would not want to do. 

Most of the articles I've seen focus on the small scale, say brewing your own coffee instead of a Starbucks latte, but they biggest waste of money I've seen is when someone gets an unexpected bequest or inheritance. They don't know how to handle it, so they evaporate the cash on trips and motorcycles. Do you have any strategies? The only useful things I see are putting it toward or a mortgage or a college education.

Yes, I'm seen it all. 

What I tell folks is to have a list of financial goals. And when you get extra money put the funds toward those goals. When my husband and I got raises, bonuses or money from my books, etc. we knew the funds would go straight to the college funds for our kids. And now that they will graduate without debt, we are saving more for retirement. Let your financial goals dictate where a windfall will go. 

What are your thoughts on a married couple getting a mortgage in only one spouse's name? I have 800+ credit. My spouse has decent credit, 720 range, but doesn't borrow money and didn't have a credit card until about a year ago, so doesn't have the history built up for higher credit. We are shopping around for a mortgage, and could potentially get a better rate with only my credit. The home we are looking for would be well within the range I would be approved for with only one income.

I think both names should be on the mortgage. As a couple you are joining your lives and finances and I wouldn't want to be the only one in my marriage on the hook for one of the largest expense in our budget. 

If you like where you live, it's within your means, and near your job and people you want to be around, it sounds like you have a great situation! Condo fees and home repair bills can really add up, so be sure to factor that into the cost of ownership. Believe me, maintenance and repairs always cost far more than you think! Also, in your late 50s, any mortgage you take on will follow you into retirement. If you're concerned about not building equity, take the difference in cost between rent and ownership and save or invest that. There are many ways to build a nest egg besides home equity!

What? You trying to take my job?

Well said!

Another point of view, are we also saying those less fortunate shouldn't order out or go to restaurants? Tipping 20% may be out of their budget, and we shouldn't shame them because of their circumstances, just like we shouldn't shame those who work for tipped wages.

Interesting point. But I might argue that if an extra $2 or $5 would break your budget, yes you should not be eating out. Because that tip is, right or wrong, part of the cost of eating out. For me, it's not about shame. Eating out is an luxury that you should not be doing if you don't have an emergency fund, not saving something for retirement or your kid's college fund. 

Trying to figure out a teenagers mind by seeing how much time they spend on their website and pages. Well 13 applications later, numerous visits, telephone conversations, meeting with admissions counselors, DD selected to attend her 10th choice. Oh yeah, she had one on campus visit. Go figure. We did see some lovely parts of the USA though. :-)

I found the Post story about tracking students interesting and not surprising. 

Read: Student tracking, secret scores: How college admissions offices rank prospects before they apply

Good afternoon. I was laid off and got behind on bills. I have a few accounts in collections and a couple of questions on repayment. First, I had two credit cards with Comenity. Comenity sold both to a debt collector. That collector has outsourced collection to another company and refuses to discuss my account with me. Am I obligated to pay this other company instead of the one that owns the debt? I am actively trying to repay, but this other company seems sketchy, won't send anything in writing about how my funds will be applied. Secondly, I understand the companies don't have to remove the debt, but does it make a significant difference in my credit score if it remains and says paid as agreed/paid in full vs removal?

If you absolutely know you owe the debt the new debt owner is in fact the owner of your debt obligation. Now, you are within your right to demand proof of what you owe so ask for it. As to your credit score, you can negotiate to pay a certain percentage of what you owe in exchange for the debtor updating your credit profile to paid as agreed. But get everything in writing before making the offer. 

I suggest you save up some money, make the offer and ask for the concession on the credit report. The company is not obligated to do it but I've seen it done. 

Also double check that the debt isn't "time barred" meaning it's too old for the company to take you to court. If that is the case, you still owe the money but the company can't sue you for it. 

Finally, if you are in the position to pay, you should even though the collection company isn't the original creditor. They bought the debt and that makes them the new owner. But since they probably paid pennies on the dollar not feel bad about offering less than what was owed. 

Mine automatically dropped when my LTV percent hit 78%. I could have requested it at 80%, but it was automatic at 78%. Maybe check that and see how many more payments with PMI you'd have to make, and if it would be cost effective to just wait it out vs. an inspection.

Yes, check. Thanks.

When I travel for work, I am reimbursed at government provided rates. This does not include tipping hotel staff or 20% in restaurants or taxis. I still tip, but I find it endlessly annoying that I can't get reimbursed for it. I understand that I shouldn't waste the company's money, but the guidelines for reimbursement haven't changed even as cultural expectations have.

I totally agree with you on this point.

So everyone who buys a house or real estate is financially ignorant - is that the point? So buying a home is never a good idea? That's what it sounds like the argument is here. So please explain. Frankly, it sounds like the fundamental problem is that Americans simply do not save enough, whether they buy real estate or not.

Okay, slow you roll because at NO point did I call homeowners ignorant. 

Please do not twist my words. 

I SAID that we should not make renters feel like financial failures. 

I SAID that I'm a homeowner and have been since my 20s and if you follow my columns, newsletters and this chat, I'm very smart about money.

I have SAID that homeownership is one pathway to building your net worth but not the only way.

And yes, I've SAID that many people -- renters, homeowners, young, old, black, white -- are not saving enough. 

The other thing to ask yourself (and spouse) is who will be your advocate when the time comes to utilize the long-term care insurance? We went through this with my parents. Paid for a great plan for years. When it came time to collect, they were in their 80s, declining physical and mental health. There was NO way they were going to be able to navigate that maze! Health care attorney son filed claim. Didn't dot an 'I'. Denied. Filed again. Didn't cross a 'T'. Denied. It took another sibling who is a professor and could wait on hold for HOURS grading papers to get it in motion. The company did not want to pay out and if they didn't have an advocate, my parents would have still been paying premiums and not receiving benefits. I won't buy long term care insurance because I am single, alone and will not have an advocate. I'm building up my emergency accounts and retirement as best as I can.

Such a great point and I've written about this very point. 

Yesterday I walked by a church in DC that had a sign out front reading, "Fight poverty, not the poor." This resonated with me. Not tipping well for delivery drivers and having derogatory attitudes toward their jobs = fighting the poor. Advocating for policies that ensure living wage = fighting poverty.

Amen. Thanks for sharing. 

I think people have such strong feelings about tipping because it's a more intense version of the "individual vs society" conflict, somewhat similar to the fight about plastic straws. Getting rid of plastic straws may feel virtuous because it's something an individual can do, but the real issue is the huge amounts of plastic waste created by large corporations, while at the same time, it creates major problems for marginalized groups (e.g., people with disabilities). If the real problem is that restaurants aren't paying workers a living wage, why would you knowingly hurt the people who have to work for them by not tipping?

Very good point. Thanks.

One Sunday my dishwasher stopped working, so I emailed my building's management. On Monday, I came home to a freshly installed brand new dishwasher. Priceless.

Hate my dishwasher.  

I have no idea where I heard this advice, but years ago, I read something along the line of "when deciding to give money to someone (panhandler, tipping, charity) think about what the amount would mean to them vs. you". When I was younger, $5 was a lot but now that I'm older and luckily more well established, $5 doesn't impact my budget as much anymore, but it will still go further for someone else. So even days when I'm feeling cheap or spent too much $$ recently, I remind myself that I'm probably making way more money that a waiter/waitress and give them 20%+. That 20% will impact them more than it will hurt me. And if you don't like the service - as Tom S says - speak up or they can't fix it!! And for the person who said "Yes, I know this hurts the deliverer, but it was they who selected for whom to work. With enough small tips, the delivery person may get the idea that this is not a good place to work if you rely upon tips" How about you choose not to eat at establishments that you have concluded aren't good places for people to work if they rely on tips? Not everyone has as much choice as you think about where they work. If you really want to be helpful - let the delivery firm know that their practice impacts tipping and you don't like it and won't keep ordering through them if they continue. ok, off my pedestal now... :-)

Good way to live.

How old were your kids when you started talking to them about setting goals? My daughter is a school teacher in an affluent area. She tried talking to her students about setting goals to complete their assignments and study for tests and was met with blank stares. Help!

As soon as they started asking for stuff or pointing for stuff. 

And I mean that. They were in car seats. My husband and I wanted to be intentional about teaching our children to be good money managers. 

Now, they didn't alway like it and there was a lot of eye rolling. And at one point I thought I might have to put an extra strong lock on my bedroom door to keep them from smothering me in my sleep (mostly  me because my husband is a dream). 

But now that they are young adults they let us know -- sometimes -- that they appreciate us setting limits, making them save, denying them stuff. 

Thanks, all, for the tips! We did do research beforehand, and many of the concerns raised don't apply to our particular roof, but I appreciate the feedback!

What a nice response. 

So sorry but I have to go. Thank you for participating in the chat and please come back. 

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Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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